U.S. Mint Makes Drastic Cuts to Its Collector Gold & Platinum Coin Offerings

| About: SPDR Gold (GLD)

Yesterday the United States Mint announced some sweeping cuts to the number of products that it will offer to coin collectors. The deepest cuts take place in the US Mint’s offerings of collectible versions of gold and platinum bullion coins.

Most people know about the US Mint’s bullion coin offerings. American Eagle coins composed of gold, silver, and platinum are sold to the public through a network of authorized bullion dealers. In recent years, American Buffalo Gold coins were added to the lineup. These coins are bought and sold primarily as a means of investing in precious metals.

Since 2006, the US Mint has also offered so-called “collectible” versions of the popular bullion coins for sale directly to the public. The coins have been available in fractional denominations, four coin sets, and one ounce sizes. They are differentiated from the “non-collectible” bullion versions by carrying a “W” mint mark. The coins are also struck on specially burnished blanks and come in custom Mint packaging.  In addition, the US Mint has offered proof versions of bullion coins, which have been sold to collectors for many years.

The US Mint’s discontinued products (via Mint News Blog) will include:

  • American Buffalo Uncirculated Gold Coins - These are the collectible versions offered by the US Mint. All fractional denominations, 4 coin set, and the one ounce coin will be discontinued.
  • American Buffalo Proof Gold Coins - The fractional 1/2 oz, 1/4 oz, 1/10 oz coins and 4 coin set will be discontinued.
  • American Platinum Eagle Uncirculated Coins - These are the collectible versions offered by the US Mint. All fractional denominations, 4 coin set, and the one ounce coin will be discontinued.
  • American Platinum Eagle Proof Coins - The fractional 1/2 oz, 1/4 oz, 1/10 oz coins and 4 coin set will be discontinued.
  • American Gold Eagle Uncirculated Coins - These are the collectible versions offered by the US Mint. The fractional 1/2 oz, 1/4 oz, 1/10 oz coins and 4 coin set will be discontinued.

Why are these products being discontinued?

The US Mint would likely cite low sales figures for the offerings, but that doesn’t get to the root of the problem. Basically, the US Mint has had a disastrous time selling the products over the past few years. This was due in large part to the way the US Mint was required to set prices combined with the extreme fluctuations of precious metals prices over the past few years.

The US Mint is required to publish prices for upcoming collectible coin products in the Federal Register. This process seems to take about 30 days. As a result, every time these pseudo-bullion coins went on sale, prices were based on precious metals values from up to 30 days ago.  Any time the US Mint wanted to change prices, coin sales had to be suspended for at least 30 days while the publication process took place.

Throughout 2006 and 2007, sales of these “collectible” bullion coins were suspended numerous times as precious metals prices climbed. Premiums above the precious metal value were in constant flux, since coin prices were fixed and precious metals changed. Typically, premiums would be high at the start of sales, but then lower as precious metals prices climbed. If you timed your purchases right, you could buy the coins for around the same price as the regular bullion coins.

During 2008, the “collectible” bullion offerings were priced early in the year when precious metals prices were at their highs. As precious metals prices dropped from their peaks, coin prices remained the same, making premiums extraordinarily high. For example, the 2008-W 1 oz. Uncirculated American Gold Eagle is currently priced at $1,119.95 (see US Mint website).  Compare this to the gold value of $742. This premium is ridiculously high for a product slightly better than a bullion coin.

The only prices that were actually lowered this year were for the platinum products. Following nearly two months of suspension, platinum coins returned with prices approximately halved. Even after the reduction, prices still reflected huge premiums. The 2008-W 1 oz. Uncirculed Platinum Eagle is priced at $1,214.95 (see US Mint website). Compare this to the platinum value of $837. Another ridiculously high premium.

On the upside, this represents the end of a bad experiment in precious metals products from the US Mint. On the downside, this represents one less way for people to acquire precious metals.

Disclosure: Long physical gold and platinum.

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